SOUTH AFRICA – South African food company RCL Foods has posted a decrease in earnings from its chicken business in the past year, and blames the result on oversupply of chicken in the market.
RCL Foods’ Chicken business unit delivered an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) down 62 per cent on the comparable period last year, despite gains in the company’s Quick Service Restaurant (QSR) share.
The company blamed the market crisis on ‘massive oversupply’, caused by surplus domestic volumes and what it called ‘dumped imports’.
South Africa negotiated an agreement with the US last year that involved tariff-free quotas of key agricultural products such as chicken from the US, in return for preferential trade rules under the African Growth and Opportunity Act (AGOA).
RCL Foods said it supports the renewal of this trade agreement for reasons of national interest even though it is detrimental to the poultry industry.
The 65,000-ton quota, relative to the total annual poultry consumption in South Africa, is not substantial, yet it is a further source of supply in an extremely oversupplied market. The company said it is changing its business model to cope with these market conditions.
RCL Foods said it is working with others in the industry to try and reduce imports from other areas, such as by pushing for a 37 per cent import tariff on European Union bone-in chicken products.
The company added that it supports new South African rules limiting the injection of brine into poultry products, saying that: "excessive injection levels by the larger manufacturers has compromised the integrity of South African chicken and the poultry industry."
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